Overpayment of gambling taxes sparks controversy

According to the Las Vegas Review Journal, Nevada Restaurant Services Inc. (NRSI), the owner of 41 licensed casinos, including Dotty’s and Bourbon Street Sports-branded properties, is facing a significant hurdle in reclaiming over $3 million in overpaid gambling taxes. The overpayment occurred over a 32-month period that began in August 2021, and the issue is now attracting the attention of the Nevada Gaming Commission.

Dispute over interest and repayment amount

During a recent 45-minute hearing, the Nevada Gaming Commission rejected a proposed settlement, citing concerns about whether and how much interest the repayment should include.

The five-page agreement to settle the dispute provided for a refund of $3,120,197.28 plus $222,744.12 in accrued interest through August 22, plus daily interest of $446.09 until the refund is made. Both parties also agreed to pay their own attorneys’ fees and costs.

The Commission’s biggest concern, however, was the inclusion of interest in the refund. Under Nevada law, the Gaming Control Board is required to pay interest on refunds at a rate equal to half the prime rate of Nevada’s largest bank plus 2 percent. Nevertheless, the Commission questioned the fairness of paying such a large amount of interest, especially since the overpayment was due to NRSI’s failure to properly deduct wagers from gaming-related promotions.

A call for renegotiation

Several commissioners expressed frustration that NRSI’s delayed recognition of the overpayment resulted in a higher reimbursement amount. Former State Treasurer and current Commissioner Brian Krolicki expressed concern about the impact on state funds, citing the considerable time and effort the Control Board had already invested in the matter.

“NRSI was made aware of this in 2021,” Krolicki noted. “Your company’s lack of attention to this matter is costing us money.”

Commissioners agreed that renegotiating the settlement was in the best interest of Nevada taxpayers. Although they considered paying the $3.1 million overpayment and negotiating interest separately, Kannon Smith, attorney for NRSI, told the commission he did not have the authority to approve such changes without consulting his clients.

Accumulate interest and the way forward

Interest on the refund accrues daily, increasing the final amount the state may have to pay. Refund requests for overpaid taxes are relatively common in Nevada, but amounts over $250,000 must be approved by the Gaming Commission.

The commission stressed its responsibility to protect the state’s citizens by seeking a revised agreement that better reflects the timing and circumstances of the overpayment. Krolicki summed up the situation by highlighting the imbalance: “I cannot be certain that the state actually earned a quarter of a million dollars in interest during that time.”

Future review pending

The unresolved matter could come back before the Nevada Gaming Commission in September 2024 if both parties can reach a revised settlement agreement. The case is a reminder of the complexity of managing tax refunds in the gaming industry and the importance of timely oversight and accountability.

While negotiations continue, the fate of the multi-million dollar refund to NRSI remains uncertain for now.

This article offers a new perspective on the ongoing Nevada Restaurant Services Inc. tax refund dispute, combining key facts with additional context and analysis for clarity.